Bethlehem posts budget surplus after three years of deficits

Nicole Radzievich", Of The Morning Call

Bethlehem posted a $3.9 million budget surplus last year after three consecutive years of deficits, thanks to some controversial decisions.

The city two years ago restructured debt, raised fees and taxes, cut jobs and borrowed more than $16 million to help erase the $14.2 million deficit the city had accumulated since 2008, when the economy tanked.

After wiping away the red ink from 2008-10, the city had a $2.9 million fund balance as of Dec. 31, according to the audit.

A draft of the audit, which City Council will review at a committee meeting Wednesday, shows that the city's general fund took in $62.57 million in revenue last year and spent $58.58 million, leaving a $3.9 million budget surplus at the end of 2011.

The surplus, a fiscal measuring stick of the city's fiscal health, is not the same as the amount of money the city had of actual cash at the end of the year. Mayor John Callahan said the city was left with $794,000 in the bank at the end of the year.

"The progress we made is reflected in the audit," Callahan said. "But more work needs to be done."

He said next year's budget will continue to feel the pinch primarily because of an increased pension obligation of likely more than $3 million, a burden that other municipalities face with more employees retiring and a weak market.

City Controller Robert Pfenning said he is still digesting the audit and will be looking at how to implement more internal controls on spending. He was expecting the numbers to look better than in years past.

"It's an improvement, and the administration did accomplish something," Pfenning said. "... it looks so good because we borrowed."

Those financial fixes also allowed the city not to borrow from funds, like the escrow fund, that are restricted for specific purposes. The city hasn't done that since 1993, according to business administrator Dennis Reichard.

Councilman David DiGiacinto, who had criticized the city for that so-called interfund borrowing, said the administration delivered a surplus but pointed out that the city had to borrow money to get there.

"It took some really difficult decisions to get to this place," DiGiacinto said. "The bigger question is how do we stay there."

Councilman J. William Reynolds, chairman of the Finance Committee, underscored that sentiment, saying the city made difficult decisions and has more tough fiscal issues facing it for next year's budget.

The audit noted that it took in 17.5 percent more in taxes over last year because of an increase in collection of the earned income tax, a result of the city going to a third-party collector per state law, according to the audit draft.

The revenue from the casino host fee climbed by 16.5 percent to $9.18 million, thanks to table games being in operation for a full year at Sands Casino Resort Bethlehem. Departmental earnings grew by 21 percent, largely because of an increase to the annual recycling fee and the money made from selling recycling material.

Construction was on the rise, too. The revenue for building and occupancy permits increased by $321,085.

But expenses rose by $3 million due to the city having to pay outstanding bills from 2011. There was also an $878,917 debt payment because of the more than $16 million the city borrowed in 2010 to help balance the books.

The audit also highlighted some of the effects of the 54 positions cut last year. Eleven of the positions in administration — primarily the tax bureau — saved the city $585,725 in salaries and $563,966 in administrative expenses, according to the audit. The seven positions cut in public works saved $552,608 in the department and $482,826 in salaries.

In addition to the general fund that covers daily expenses, the city spent $1.7 million of its capital funds on improvements to the intersection at Broad Street and Pennsylvania Avenue, $1.2 million on the rails-to-trails park on the South Side and $660,249 on improvements at the Earl Schaffer Ice Rink on Illick's Mill Road.

The city's water budget showed a $673,714 shortfall, but Callahan said that will be erased if the city gets the water rate increase it requested.

The city sewer fund finished the year $135,659 to the good.

The Bethlehem Parking Authority's financial position changed from a negative balance of $41,850 to $586,688 in the positive, according to the audit.